Mansfield school district sues Chesapeake over leases

After settling hundreds of royalty lawsuits, Chesapeake Energy is being sued by the Mansfield school district, which says it used sham transactions to cheat it out of more than $1 million from its natural gas leases.

The district said Chesapeake and its partner Total E&P USA, the French energy giant, underpaid the royalties from more than a dozen leases it holds or has an interest in. The district’s direct lease holdings cover more than 750 acres in Tarrant and Johnson counties.

Chesapeake is accused of improperly pricing natural gas when selling it to affiliates, which is not allowed under the contracts, the lawsuit states. The Oklahoma City energy giant also improperly subtracted post-production costs, which generally is not allowed under the leases.

The lawsuit, filed late Friday, seeks disclosure and royalty accounting reconciliation on the leases. The lawsuit will be grouped with other “high value” lawsuits that were filed by large landowners, government entities and businesses in Tarrant County civil court.

“Notwithstanding the clear and express language of the oil and gas leases [Chesapeake and Total] have breached them by, among other things, failing and refusing to pay royalties in accordance with their terms and conditions,” according to court records.

James Key, the Fort Worth attorney representing the school district, did not return a phone call from the Star-Telegram seeking comment.

Gordon Pennoyer, a spokesman for Chesapeake in Oklahoma City, said the company had not been served with the lawsuit and declined to comment. But in previous lawsuits Chesapeake has contended that the transactions were done in accordance with the lease terms and in good faith.

Last month, Chesapeake agreed to pay $51 million to wipe out hundreds of similar lawsuits. Most of those cases concerned landowners with smaller leases. The agreement wiped out most of the lawsuits filed by attorneys at the McDonald and the Circelli, Walter & Young law firms.

Earlier this year, Chesapeake settled similar lawsuits with the city of Fort Worth and the Fort Worth school district. The company paid the city $15 million and the school district $1 million.

Both of those lawsuits were among the high value lawsuits filed against Chesapeake. Before this lawsuit was filed, a review of court records indicated that Chesapeake had resolved, in one way or another, 24 of 33 lawsuits from these larger leaseholders.

This story was originally published August 1, 2016 at 5:17 PM with the headline "Mansfield school district sues Chesapeake over leases."